* Sales volumes grow 0.2 pct from July, 10.1 pct yr/yr
* Building recovery suggests end to interest rate cuts
* Central bank's Wed rate cut seen as end of cycle
SAO PAULO, Oct 11 Retail sales in Brazil grew in August for the third straight month, underscoring an incipient economic recovery and reinforcing impressions that the central bank had finished cutting interest rates.
Sales volumes rose 0.2 percent in August from July , government statistics agency IBGE said on Thursday, defying forecasts of a 0.1 percent decline in a Reuters poll.
Robust retail sales have helped Brazil avert a recession in the past year as manufacturers struggled with weak global demand, \ and a broad range of government stimulus measures have further stoked consumer demand since June.
The central bank has lowered borrowing costs to all-time lows to bolster the economy, including a tenth consecutive interest rate cut on Wednesday.
In its decision, which most analysts interpreted as a clear signal that the rate-cutting cycle was over, the bank highlighted "the recovery of domestic activity."
August retail sales jumped 10.1 percent from the year-earlier period, the IBGE added, more than the 9.1 percent median estimate in the Reuters poll of 22 economists.
Brazil's main gauge of retail sales excludes building materials and automobiles, which had a sharp rise in August as consumers rushed to car dealers to take benefit of a tax break expected to expire at the end of that month.
Taking into account automobiles and building material, retail sales in Brazil rose 2.7 percent from July and 15.7 percent from the same month a year before.
Sales of furniture and appliances bolstered the August rise, growing 2.5 percent from July, while sales of personal items like jewelry and sporting goods rose 2.3 percent in the month.
President Dilma Rousseff announced in August an extension of tax breaks on locally made cars and home appliances as part of a flurry of measures to boost demand and support local factories.